I’ve been involved in various aspects of organizational change, and specifically, digital transformation, for a very long time. Recently, however, I realized that I’ve been looking at the organization all wrong, and that was limiting my effectiveness in helping the organization to change. I had, as many people do, thought of an organization as a kind of system designed to get things done – people in roles performing processes, in the context of an interwoven culture.
I now see that this is not the whole story, and why most organizational change initiatives fail: they threaten the tacit status reward system of the organization in ways that are difficult to counteract. In some way, this is not a new insight, as Machiavelli (1469-1527) notes in The Prince, his famous work on politics and leadership:
“… there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.”
Organizations, as it turns out, are not machines for getting things done. They are social reward systems that happen to do work as a by-product. More precisely, people in an organization do work, and they are rewarded with status. Yes, they are compensated, too, but beyond satisfying basic survival needs, compensation is primarily an enabler of status expression. Organizational change threatens this reward system in unpredictable ways so people fight it.
Talking about status is typically taboo, and yet it ultimately controls the culture of the organization. The reason why I think of status as being like the third rail in a subway (the one that carries the current) is that if you touch it, you’ll die. It’s invisible because sometimes you don’t know that you’re threatening someone’s status until you trigger a reaction, and by then it’s often too late.
Digital transformations are especially challenging: the skills and behaviors that it values and rewards can be quite different from pre-digital organizations. The benefits of incumbency are typically knowing how the current system works and having a network of allies who help to get things done within that system. Digital disruption replaces this old system with a different one, rendering these networks potentially less valuable.
The key word here is potentially. Threatening the existing status system, the invisible third rail, is fatal, but so is failing to change, because it will cause the organization, and its status reward system, to collapse.
The way around this is to realize that the status reward system and its network of alliances is really separate from the existing way of working. High status individuals achieved that status because of the existing system, but in doing so they built a network of relationships that they can use to either defend the current system, or to change it. The choice is up to them. Their real influence in the organization is their network of alliances, not the specific things that they manage. Once they realize that, they can free themselves from being trapped in the old system. And as Peter Senge observed:
“People don’t resist change. They resist being changed.”
So what can you do if you are trying to change the system?
- De-personalize the change. Don’t waste time criticizing the old system, because in doing so you’ll turn people you need as allies into enemies. Focus everyone on some external change in customers or the market to which you all need to respond.
- Enlist the help of high-status individuals. Make them part of the change, and help them focus on moving forward, seeing how the change can benefit them, and also seeing how they can contribute to the change.
- Create a sense of urgency to act. In order for high-status individuals to embrace change, they need to feel that their status is threatened if the current system fails. When it is, they need to recognize that while they have political capital today, it has a short shelf-life; it will become valueless as the organization’s fortunes wane, so time is of the essence.
- Make it safe to try new things. Fear of failure, especially when it might threaten status, inhibits experimentation that leads to innovation. Reward learning, not results.
- Protect the change while you build support. Not all change will be met with open arms at first, and it may take you time to build the support you need. Creating a protected, supportive environment is usually essential in the early days of the transformation.*
Finally, recognize that some people who currently have high status may lose out, and some people with low status are going to “win”. Jobs will change and fiefdoms will fall. Many things the organization values today may cease to have meaning. Can the people working in those functions adapt to contribute in new ways? Absolutely! Do they want to? That’s an entirely different matter…
It’s best to be completely transparent about how you will handle this. Engage the people who might be affected in open discussions about how decisions will be made, and even ask them to help you make them. Communicate to them that are valuable, and back that up with action. Help them find new places in the organization; they have value far beyond the specific jobs that they fill today.
Ultimately, transformation is not about specific jobs or roles, because those change all the time. Transformation is about engaging people in moving in a new direction, while leveraging the skills and assets you have to make the change. The social-status network can be an asset to help you foster change, if you can learn how.
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* Scrum.org has a white paper describing just such a supportive environment in which innovation can incubate; for more information, see https://www.scrum.org/resources/scrum-studio-model-innovation.